Treasuries Steady As Fed Statement Offers No Surprises

By Michael Aneiro

Treasuries are steady, holding their gains from earlier today, after the latest Federal Reserve policy statement – just as expected – offered pretty much nothing in the way of surprises or deviation from the Fed’s previous policy path. The only meaningful change came in the first paragraph, where the Fed said the economy “has picked up recently, after having slowed sharply during the winter,” and said that while household spending and appears to have picked up since its last statement, business fixed investment “edged down.” Here’s that paragraph in its entirety:

Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated. Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.

Otherwise the only notable change was that the Fed’s policy committee was unanimous in signing off on this statement, with Minneapolis Fed President Narayana Kocherlakota dropping his previous dissent. As expected the Fed kept its tapering schedule going apace, lopping another $10 billion off its monthly bond purchases to bring that total to $45 billion per month, down from a peak of $85 billion, on the way to phasing out the purchases entirely.

The 10-year Treasury yield is up 8/32 on the day to yield 2.668%, pretty much exactly where it was before the statement’s release, while the 30-year bond is up 11/32 to yield 3.474%, per Tradeweb data.

Here’s a handy side-by-side guide to how the statement changed from the last time around, courtesy of our colleagues at the Wall Street Journal’s Real Time Economics blog.

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APRIL 30, 2014 5:00 P.M.

Win wrote:

The Fed consistently is too optimistic on their GDP forecasts. Try to find what they predicted for 1Q14 GDP & it likely was remarkably higher than the 0.1% actual. They need to publish more realistic GDP forecasts, stop monetizing the debt, & being demand POTUS lead Congress on a private-sector-lead growth & tax reform agenda.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.